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Nov 11, 2012, 10.01 AM IST | Source: Reuters

Obama says tax hike on rich should be part of fiscal deal

Newly re-elected President Barack Obama offered on Friday to deal with Republicans to avert a looming US fiscal calamity but insisted a tax increase for the very rich must be part of the bargain.

Obama says tax hike on rich should be part of fiscal deal

Newly re-elected President Barack Obama offered on Friday to deal with Republicans to avert a looming US fiscal calamity but insisted a tax increase for the very rich must be part of the bargain.

Obama reminded Republicans that his approach to avoiding steep tax hikes and spending cuts due in January, which could trigger another recession, had just won the backing of Americans at the polls.

He spoke just hours after John Boehner, the Republican Speaker of the House of Representatives, had repeated his party's commitment not to raise anyone's tax rates as part of a deal to address the fiscal crisis.

In his first event at the White House since beating Republican Mitt Romney in Tuesday's election, Obama called on Congress to work with him to produce a plan and invited congressional leaders to meet with him next week.

"I'm not wedded to every detail of my plan. I'm open to compromise. I'm open to new ideas," he said.

The "fiscal cliff" of steep government spending cuts and tax increases due to be implemented under existing law in early 2013 is Obama's most pressing challenge after winning a second term.

Aimed at cutting the federal budget deficit, the planned measures could take an estimated USD 600 billion out of the economy and severely hinder economic growth.

While striking a conciliatory tone toward the Republican House majority, Obama said voters supported his ideas, including raising taxes on the wealthiest Americans.

"I just want to point out, this was a central question during the election. It was debated over and over again. And on Tuesday night we found out that the majority of Americans agree with my approach," he said.

Earlier, Boehner called on Obama to play a more active role in addressing the issue and urged the president to take the lead in negotiations.

"This is an opportunity for the president to lead. This is his moment to engage the Congress and work towards a solution that can pass both chambers," Boehner told a news conference.

While disagreeing on immediate measures to avert the looming crisis, Obama and Republicans may find common ground in calls for enactment over the next six months of a larger package of deficit reduction measures, including a rewrite of US tax laws.

The non-partisan Congressional Budget Office reiterated on Thursday that if left unaddressed, the abrupt fiscal tightening would knock the economy back into recession, with unemployment rates soaring back to about 9 percent. The rate is now 7.9 percent.

But it also warned of a crisis ahead if the United States does not stem the growth of its exploding deficit.

Partisan squabbling over the budget crisis will also harm the US economy, according to a strong majority of economists polled by Reuters after Tuesday's presidential election.

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